Commitments and Contingencies
|3 Months Ended|
Mar. 31, 2022
|Commitments and Contingencies|
|Commitments and Contingencies||
12. Commitments and Contingencies
The Company’s existing lease as of March 31, 2022 for its U.S. location is classified as an operating lease. As of March 31, 2022, the Company has two operating lease for facilities. During the quarter ended June 30, 2021, the Company renewed its Rockville MD facility lease by entering into a Second Lease Amendment which extends the lease term for 63 months beginning on September 1, 2022 and ending on December 31, 2027 at stated rental rates and including a 3-month rent abatement. The Second Amendment also has options for a Tenant Improvement Allowance and a Second Extension Term. The Second Amendment also gives the Company the right to expand their space by giving notice to the landlord before December 31, 2021. The Company did not give notice to expand the space during 2021. The Second Extension Term is offered at market rates and there is no economic incentive for the lessee, therefore the Company has determined that it is not part of the original lease term. There is an option in this Second Amendment to Lease for the Company to borrow funds for tenant improvements subject to an 8.5% interest rate.
The Company also leases research and office facilities in Barcelona Spain for its 100 percent owned VCN subsidiary. The current lease is short term agreement with a 90-day termination notice provision that can be exercised by either party. On the closing date of the VCN acquisition, a sublease was executed for SYN to lease research and office facilities at a new location in Parets del Valles (Barcelona) from the former owner of VCN. This lease was executed for an initial term estimated to begin in January 2023 until October 2026, with an option to renew for an additional five years.
Operating lease costs are presented as part of general and administrative expenses in the condensed consolidated statements of operations, and for the quarter ended March 31, 2022 and 2021 approximated $107,000 and $51,000, respectively. For the quarter ended March 31, 2022 and 2021, operating cash flows used for operating leases approximated $112,000 and $79,000, respectively, and the right of use assets exchanged for operating the lease obligation was $1.3 million. The day one non-cash addition of right of use assets due to adoption of ASC 842 was $538,000.
A maturity analysis of our operating leases as of March 31, 2022 is as follows (amounts in thousands of dollars):
Risks and Uncertainties
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of COVID-19 and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.
12. Commitments and Contingencies – (continued)
As COVID-19 continued to spread around the globe, the Company experienced disruptions that impacted its business and clinical trials, including the postponement of clinical site initiation of the Phase 1b/2a clinical trial of SYN-004. The extent to which the COVID-19 pandemic impacts the Company’s business, the clinical development of SYN-004 (ribaxamase) and SYN-020, the business of the Company’s suppliers and other commercial partners, the Company’s corporate development objectives and the value of and market for the Company’s common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, especially in light of the new variants, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements in the United States, Europe and other countries, and the effectiveness of actions taken globally to contain and treat the disease. The global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic could have a material adverse effect on the Company's business, financial condition, results of operations and growth prospects. In addition, to the extent the ongoing COVID-19 pandemic adversely affects the Company’s business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties which the Company faces.
Through the VCN Acquisition, the Company has operations in Spain and may conduct research and development, manufacturing, and clinical trials in Western European countries. The invasion of Ukraine by Russia and the retaliatory measures that have been taken, or could be taken in the future, by the United States, NATO, and other countries have created global security concerns that could result in a regional conflict and otherwise have a lasting impact on regional and global economies, any or all of which could disrupt our supply chain, and despite the fact that we currently do not plan any clinical trials in Eastern Europe, may adversely impact the cost and conduct of R&D, manufacturing, and international clinical trials of our product candidates.
The entire disclosure for commitments and contingencies.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef